Pepper prices surge on speculation

A high degree of speculative trading in the black pepper futures market was driving the prices of the spice up. The bullish trend, contrary to all global market parameters, was likely to come to an end by mid-April, with Vietnam's output and pricing strategy becoming clear then, opined exporters.

All the contracts for delivery from April to September were quoted at higher levels today on both the NCDEX and the NMCE, amidst a high degree of volatility, they added.

A section of exporters here believes that both futures and spot markets are under the control of eight to ten big business houses and hence the steep rise in prices.

These big operators had been profiting by buying from the spot market and selling at higher tags in the futures market. A section of the operators was controlling the domestic pepper market to take advantage of futures trading, they said.

"These operators are ready to buy any quantity of pepper from the spot market at prices fixed by the sellers. They earn a minimum annualised return of 40 per cent by offloading the spice in the futures market," said a leading Kochi-based exporter. On Tuesday alone, spot prices rose by Rs 400 a quintal following a heavy demand for the spice.

The bullish trend is, however, expected to end by the middle of April, as Vietnam's output and pricing strategy will be clear by then. Vietnam currently offers ASTA at a tag of $2,900 a tonne and the domestic tags are around $3,200 a tonne.

A major factor for the recent spurt in prices is the widespread rain in Vietnam last week. But, with rains having stopped and the harvesting active once again, a drop in prices by around $200 to $300 a tonne cannot be ruled out by mid-April.

Anticipating such a scenario, US and European buyers have adopted a wait-and-watch policy for the time being and are not procuring from the international market.